Quick Summary of the Core Content
The traditional content business within the entire entertainment industry has completely stalled. Listed companies have unanimously turned to AI as the key driver to boost stock prices and facilitate transformation and survival. A rather surreal phenomenon has emerged: new AI-related products have not even made a splash among the general audience, and their viewership figures are virtually non-existent, yet their stock prices have soared first in the stock market. The approaches of different entertainment companies to leveraging AI vary vastly. Some are betting their entire assets on the future of AI; others are using it merely as a gimmick to drive stock price increases; and there are those that possess core intellectual properties (IPs) and simply disregard the current market trend. Essentially, the old growth stories of “traffic, IP, and membership fees” that the industry has been preaching for over a decade are no longer effective, and they can no longer sustain the industry. Therefore, AI has become the new tool to create attractive narratives for the capital market.
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Detailed Analysis
The Most Surreal Phenomenon: An AI Drama That Didn’t Catch Fire with the Audience, but Its Stock Price Soared by 10 Billion
The drama “Hou Xiyu Ji” (The Later Journey to the West), which sparked the entire AI-driven entertainment market trend, can be considered the most absurd “event-driven stock price booster” of this year in the A-share market. As the first AI-based long drama to air on a national prime-time channel, its actual performance was dismal: it received almost no discussion online, had a market share of less than 1% in streaming platforms, and its viewership rate failed to reach even 0.3%. It couldn’t even compete with a regular A-grade romantic drama on the same platform, and it didn’t generate any advertising revenue during its first five episodes. Nevertheless, within just two days of its release, the parent company, Mango Media, experienced two 20% stock price increases, resulting in a market value surge of over 10 billion yuan, and this also drove more than a dozen media stocks in the sector to rise by over 15%. In essence, investors were not buying into the quality of the drama; they were buying into the fact that it was the “first AI-based long drama to air on a national prime-time channel.” Previously, Mango Media’s stock price had dropped from a high of 91 yuan to just 14 yuan, and the old growth stories were no longer compelling. With this “AI drama being reviewed and aired simultaneously,” the company suddenly had a continuous stream of positive news, which was more beneficial to its stock price than producing ten S-grade dramas.
Different Companies’ Approaches to Leveraging AI Reflect Their Current Situations
The attitude of entertainment companies towards AI is not based on whether the technology is reliable; it’s entirely about what they currently lack:
- Huace Film & Television is like a gambler in a fever: They invested 3.3 billion yuan in purchasing servers for computing power rental, which is 17 times their annual net profit and even higher than their total annual revenue. It’s like a person earning 200,000 yuan a year taking out a loan of 3.4 million yuan to buy a shop, even though they might struggle to afford the interest. The reason is simple: the gross profit margin of the computing power business is 36%, 15% higher than that of making dramas. They don’t have to worry about actors’ performances or audience preferences. Even though they can’t reveal their computing power clients, they want to transform from a light-asset drama-making company into a heavy-asset technology company, simply to drive up the market price first.
- Bona Film uses AI as a tool to control stock price increases: Their AI-themed movie “Sanxingdui” hasn’t even been released, yet the company has experienced five stock price increases just by claiming to have an AI strategy. Despite their main business experiencing a 95% loss this year and their box office revenue increasing by 15%, no one pays attention to these actual results. By labeling their products as AI-driven, their stock price rises effortlessly, offering excellent value for money.
- HuaYi Film regards AI as a “life-saving remedy”: The company is in pre-restructuring with massive debts and negative net assets, and it doesn’t have the funds to produce high-budget projects. By releasing ten AI-based short dramas and movies, the cost is negligible. Even if the released works don’t attract much attention, it at least shows the capital market that they are still riding on the latest trend and prevents them from being delisted.
- Guangxi Light Media is the most defiant “anti-AI trend follower”: They own the super IP “Nezha,” and the revenue from their main business is sufficient to support their market value. The company’s owner, Wang Changtian, openly states that AI is an immature tool that doesn’t solve core issues such as creativity and scriptwriting. They disdain using AI to manipulate stock prices.
The Difference Between Actual Implementation and Merely Riding on the Trend
Not all companies are merely riding on the AI trend. Yuewen is one of the few that have truly integrated AI into their business. They use their IP library of online novels to produce AI-based comic dramas, producing over 100 pieces per month. One of their AI comic dramas, “San Qian Bi Hu,” has attracted over 3 billion views, which in turn boosted the popularity of the original novel. In the first half of the year, revenue from AI-related short dramas and comic dramas increased by 2.3 times. However, even with actual implementation, they can’t escape the rule of “market price speculation taking precedence.” The production costs of Yuewen’s new AI business are nearly equal to their revenue, meaning they’re working hard for little profit and even losing ground in their core online reading business, where revenue decreased by 7%, dropping from 62% to 52% as readers prefer free AI content. As a result, their net profit plummeted by 84%, and all investment banks lowered their target prices. Yet, their stock price soared because investors are more interested in the 2.3-fold growth rate of their AI-related business and whether they can tell a compelling new growth story.
The Industry’s Collective Cling to AI: A Sign That Traditional Business Models Are Dead-Ended
Entertainment companies are now desperately relying on AI as a lifeline. It’s not that they’ve suddenly fallen in love with technology; the traditional entertainment business model is simply unsustainable. In the first half of this year, the film industry as a whole declined by 40%, and most film and television companies are in the red. The market for long dramas is saturated with S-grade productions, and top dramas have less than 1% market share. Audiences are increasingly averse to long-form content. The previously popular trends of relying on traffic, IP adaptations, membership fee increases, and the metaverse concept have all failed to attract investors. AI has emerged as the perfect new solution: it can directly reduce production costs (what used to take hundreds of people six months to complete can now be done in weeks with AI) and provide a new narrative of “high growth and technological innovation.” This allows companies with previously high P/E ratios (price-to-earnings ratios) to transform into technology companies with much higher ratios, potentially doubling their stock prices. In reality, it’s not that all entertainment companies want to become technology companies; it’s just that, apart from AI, there’s no other new story that can attract the capital market’s attention.